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What responsibilities does the firm have to its stakeholders?


What strategies or actions should the firm take to address stakeholders?


Shareholder value, stakeholder management, and social issues what's the bottom line?

Stakeholder Management Analysis

The purpose of this report is to focus on the issue of Australia Obesity with the help of a documentary named ‘Tipping the scales’ where the idea of degrading lifestyle in Australia has been highlighted (Abc.net.au, 2019). In this documentary, the speakers have mentioned Australia as the unhealthiest country as the rate of obesity and type 2 diabetes is higher than any other European countries. It has been observed that along with adults, even children have been diagnosed with diabetes at very early age. Food processing companies, restaurant chains and retailers are ignoring their moral responsibility towards the health of society, and are merely focused on generating their own profits and becoming self-absorbed with the progression of time. The documentary consists of some important yet shocking data like 60% of the Australians have found to be overweight and soon the percentage is going to increase (Abc.net.au, 2019).

Apparently, the culture food industries are following has been accused for not maintaining social sustainability guidelines yet the tendency of consuming processed food cannot be ignored totally. Governing bodies has taken serious steps on planning to launch the sugar tax on produced food and drinks to put restrictions on consumption of unhealthy amount of sweetened and high calorie food products. According to (Abc.net.au, 2019), this documentary works as an alarm and asks what kind of lifestyle the generation wants and how they want to see themselves 30 year from now. This degrading rate of health statistics is frightening in terms of imagining the future where multiple issues of public health exist. This report uses the stakeholder management theory to analyse the stakeholders involved in Australia’s growing obesity issues. Using the Five Key Questions of Stakeholder Management, we will discuss the key stakeholders, their stakes and the opportunities and challenges they present. We will also examine key responsibilities of stakeholders and identify potential strategies to help address the obesity epidemic. The report will also examine the concept of creating shared value, and will highlight how this approach would benefit the stakeholders involved.

The stakeholder theory explores the relationship between organisations and the people that have invested interest in its operations, while encouraging businesses to consider the shared value and relationships they can create with stakeholders (Freeman, Wicks & Parmar 2004, p.364). In this documentary, numerous key stakeholders highlight the two-way interaction between stakeholders and organisations, with each affected by the actions, decisions and policies surrounding Australia’s obesity epidemic (Carroll & Buchholtz 2015, p.66). Key stakeholders in the documentary include local communities, such as Australian residents, local schools, universities, workplaces and the general public. Suppliers and associated businesses including sugar famers, fast food chains and soft-drink companies are also primary stakeholders. The local, state and federal governments are secondary social stakeholders and regulators such as councils, health professionals and public health advocates are also important (REFERENCE DOCUMENTARY??). Other stakeholders with lesser influence are industry employees and customers, media and academic commentators, future generations and retailers such as supermarkets.

Identifying Opportunities and Threats

Each of these stakeholders views Australia’s obesity issue from a different perspective, with contrasting opinions, concerns and expectations. Understanding their individual stakes will help determine who holds the most importance and requires central attention (Carroll & Buchholtz 2015, p.69). The stakeholder theory identifies three key stakes as legitimacy, power and urgency. Legitimacy refers to the perceived validity of a stakeholders claim, including the assumption that their actions are desirable within social values (Mitchell, Agle & Wood 1997, p.866). In this documentary, the government and regulators demonstrate legitimacy, while this stake is not as obvious for local communities and the industries. The government is at the forefront of the issue, with other stakeholders trying to persuade them for or against the introduction of a sugar tax. Health professionals and public health advocates have legitimate claims stemming from their expertise and focus on bettering Australia's health, preventing further rise in obesity, related diseases and strain on the health system. In contrast, the claims made by the industries, including fast-food chains and soft drink companies, have little legitimacy due to their biases. The food industry has a desire to make profit, but no imperative to create a healthy, active Australia (REFERENCE FOUR CORNERS – PUT IN EXAMPLE TABLE!!!).

Power assesses the level of influence stakeholders have and how they can increase authority (Carroll & Buchholtz 2015, p.70). Again, the superior position of the government sees them with excessive power, while suppliers and industries also hold considerable power. Although they may only be delaying the inevitable, with 28 countries already imposing the sugar tax, the industries can put much more into the debate than public health and consumer voices (REFERENCE FOUR CORNERS – EXAMPLE TABLE). Stakeholders invest considerable time and money trying to influence the debate and although actions are not always moral, they are effectively able to pay for increased ‘power’. For example, Coca-Cola gave money to 94 separate health agencies to argue physical activity as the cause of obesity (REFERENCE 4 CORNERS/ EG). In contrast, health advocates and individuals hold little influence due to their insignificant size and although working together will increase power, it is unrealistic to achieve anything on a large enough scale (Mitchell, Agle & Wood 1997, pp.865-866). For example, a consumer boycott where no-one buys Coke would make a statement but is not viable.

Urgency identifies the degree to which immediate action is required based on stakeholder claims or actions (Carroll & Buchholtz 2015, p.70). Health professionals draw on alarming statistics and extraordinary cases to increase their urgency and persuade the debate. For example, Dr Gary Fettke’s discussion of foot and leg amputations (REFERENCE 4 CORNERS, EG TABLE) intensifies the burdens of obesity and reinforces the urgency of finding a solution. Lobby groups and industry companies can also create urgency through strikes or protesting, while local communities are too insignificant to force immediate attention.

Creating Shared Value Approach

It is important to note that these stakes work as an interrelated unit and when assessed together, help identify stakeholders true impact. For example, a stakeholder may have a legitimate claim, but if they have no power or urgency, nothing is likely to happen (Carroll & Buchholtz 2015, p.78).

Identifying the opportunities these stakeholders present will help fosters better relationships and allow stakeholders to work together in targeting obesity concerns, while assessing potential threats is also important, as these detract from success and shareholder value (Hillman & Keim 2001, p.125) A partnership between health advocates and local communities provides key opportunity to educate the public and prevent obesity rising to 80% as is currently expected by 2025 (REFERENCE 4 CORNERS). Community-based prevention programs offer potential to target a large population across multiple locations including schools, universities and community centres (Middleton, Henderson & Evans 2013, p.202). The collaboration of stakeholders, engagement with local people and consideration of factors that promote unhealthy behaviours are key to the success of these programs (Middleton, Henderson & Evans 2013, p.202). By drawing on expertise of health professionals, funding by local government and communities to bring people together, the likelihood of effective intervention increases.

An apparent challenge is the immoral behaviours by industries actively working to persuade against a sugar tax. Advertising issues like persuading human emotion and targeting children are common ethical issues that soft-drink companies ignore in the interest of generating sales (Carroll & Buchholtz 2015, p.383). The use of money and status to increase power is also immoral, with Coca-Cola a primary offender. For example, Coke paid scientists to conduct research and shift blame for obesity to lack of exercise, while their headquarters hosted the Dieticians Association seminar (REFERENCE 4 CORNERS). Although complex interventions can be difficult to design, deliver and manage (Middleton, Henderson & Evans 2013, p.208), it is clear that stakeholder collaboration is a central opportunity, while managing key threats will help eliminate delays in improving Australia’s health

The idea that obesity is caused by individuals and is not the result of corporate decisions or behaviours is at the forefront of the argument by the food industry against government action. However, the food and sugar industries have responsibilities toward their stakeholders. The food industry must take some responsibility for the increase in availability of processed foods at relatively low costs. High body mass or obesity is responsible for 8.3% of the total burden of disease in Australia, this statistic was reported by the Global Health Data Exchange in 2016.

Conclusion

Much research has been undertaken and results have shown that obesity is not a personal choice. “The failure of the unregulated market to deliver societally optimal outcomes call for government intervention through regulation, taxes and subsidies, to create environments that make the healthy choice the easy choice” (Veerman L, 2019).

The problem of obesity cannot be left up to individuals to solve without society as a whole introducing strategies and programs to make it easier for individuals to make healthier food choices and encourage the undertaking of more physical activity. Where economics within the food industry is how a society best allocates their resources to maximise the health and wellbeing of its people, promoting healthier food choices and the increase in physical activity should be the start of changing the trend in the increasing levels of obesity.

It is understandable that the food industry continually rebut the argument that they are in part responsible for the obesity epidemic, the reason for this opposition is due to the impact it may have on their profits and their commitments to their shareholders. If interventions are not put in place which involved the food industry’s cooperation, Price Waterhouse Coopers predict, “there will be 50% more obese people by 2025, and the cumulative marginal economic costs to Australia will reach $87.7 billion, not including the impact on the quality of life of the obese, their families and carers.”(Public Health Australia, 2018)

Government intervention has been involved in many of the positive changes in behaviour within Australian public health, such as immunisation and smoking rates. Interventions need to be considered in an effort to combat the obesity epidemic. Interventions could include introducing taxes on unhealthy food and sugar, improvements to food labels and restriction on food advertising to children. The responsibility for reducing the national obesity problem is a joint one between individuals, the food industry and the government.

The introduction of a sugar tax was widely discussed in The Tipping the Scales documentary, with Australia is in the midst of an obesity epidemic the push for a national obesity strategy and further investigation into the introduction of a tax on sugar sweetened beverages should be stronger. The food industry is having a direct effect on its stakeholders and with obesity being the number one public health problem (Aly DR, 2018) the responsibilities of the food and sugar industries are now greater than ever.

The Tipping the Scales documentary detailed the argument for government intervention and the introduction of a sugar tax. This would be a good start as research has shown in 28 other countries that have implemented such a tax already have seen some good results. However, this is only one of a number of strategies to overcome and ultimately prevent the problem of obesity.

The obesity epidemic cannot be overcome by the food industry alone. A joint effort is required to produce a national nutrition strategy based on the Australian Dietary Guidelines, and such an effort would involve, “governments, nutrition scientists, industry and civil society working together across the food system – from food production through to retail” (news.com.au, 2018).

The food industry must work with consumers and implement strategies that assist with and increase the likelihood of them making healthy choices. Strategies need to directly affect individual behaviours with the main objective to increase the inclination to make healthy choices, these should include health education, health promotion programs and social media or marketing campaigns. The food industry needs to be particularly involved at the implementation stage of any new initiatives or actions.

The consumption of added sugars by Australians is well above the World Health Organisation’s (WHO) recommendation of no more than 25g per day. Recommended actions to initiate improvements in the diet of Australians include improving the availability of healthy food options in public areas and making improvements to the overall supply of food. The food industry must work with key stakeholders to ensure identified strategies are implemented, these include, better food labelling, reformulations of food products and the introduction of a tax on sugary drinks.

Ultimately, if the food industry wants to retain its status of self-regulation, build relationships with the public, keep the chance of government intervention low and initiate worthwhile public and private partnerships, new strategies are required. “An excellent beginning would be to suppress automatic opposition to public health recommendations over the last decade and embrace recommended changes” (Jeffrey P. Koplan, MD, MPH; Kelly D. Brownell, PhD, 2010

The documentary “Tipping the Scales” has identified a number of societal and health issues affecting the stakeholders of the sugar industry, including obesity and obesity related health issue. One concept that the sugar industry could adopt to help improve their profitability, society and overall business is Creating Shared Value. Creating Shared Value (CSV) is a business concept where policies and procedures are designed to enhance the competitiveness of a company while also advancing the economic and social value of the community they operate within (Wojcik 2016, p. 33).  By redefining social issues in terms of value, CSV shows that businesses need to focus on identifying and expanding societal and economic progress (Porter & Kramer 2011, p. 66). If the sugar industry were to adopt a CSV concept compared to a Corporate Social Responsibility (CSR) concept, they would be embracing a longer-term, more environmentally friendly socially inclusive strategy (Orr & Sarni 2015, p. 19). This would help the sugar industry with many of the social issues it is facing such as obesity and government regulation.

CSR is a business concept that is similar to CSV and it is important to distinguish between the two in order to analyse what concept the sugar industry is currently using. Under the CSR concept, the sole purpose of a business is to maximise short term profit and any social issues are seen as peripheral to management challenges (Wojcik 2016, p. 34).  As a result of this peripheral view, it is considered that CSR strategies only return a portion of the company’s profits to society (Nam &Hwang 2018, p. 2). CSV differs from CSR by taking the view that social concerns are not disconnected problem but are instead opportunities directly linked to business strategy (Wojcik 2016, p. 38).  Using the sugar industry as an example, they are currently using CSR strategies, they are allocating a portion of their profits to helping societies health problem and arguing that these help problems are not directly linked to their product. If the sugar industry were to adopt a CSV mentality, they would view the health problems as opportunities to help society and change the way they operate to more efficient and profitable business models.

The sugar industry is having a direct effect on the health of their external stakeholders and is an area where adopting the CSV concept is an opportunity to improve the situation for everyone involved. As described in the documentary, there has been a sharp increase in the prevalence of obesity which coincides with the temporal increase in the consumption of added sugar (Brand-Miller & Barclay 2017, p. 854). Viewing this obesity issue in terms of valve, as CSV does, would thereby highlight this as an area where social value can be improved because corporate success and societal prosperity are closely connected and interdependent (Nam &Hwang 2018, p. 2). Therefore, this is an area where the sugar industry could be redistributing their resources in order to innovate and improve social and economic wellbeing.

The documentary also heavily discussed government legislation and the introduction of a “sugar tax” to help with the obesity dilemma facing society, before coming to the conclusion that there is no clear solution. However, Porter and Kramer (2011, p. 74) discuss how the right kind of government legislation can encourage companies to purse shared value and stimulate innovation. Government legislation should be designed around societal objectives which will encourage companies to invest in shared value rather than maximising short term profit (Porter & Kramer 2011, p. 74). The legislation would then create a shared value between the society’s obesity problems and the sugar industry thereby encouraging sugar producers and food companies to develop new products and methods that are economical and support the obesity problem.

Tipping the Scales identified a number of social concerns linked to the sugar industry and showed that the sugar industry is currently using CSR strategies to meet their social requirements. Under this strategy, the sugar industry is mainly concerned with short term profits and does not view the societal issues as linked to their business strategy.  However, with the right type of legislation, it may be possible for the government to guide the sugar industry down the path of CSV. If the sugar industry were to adopt a CSV outlook, they would then accept that any and all societal issues directly affect their business strategies and that they need to address both society and business areas in terms of value. This would then result in the sugar industry innovating to find better ways of business and healthier product which not only increase the value of their business but the value of society as a whole.

Conclusion

After reviewing several areas of documentary, this report has come to a conclusion that to mitigate the obesity issues across the world and specifically, to treat the critical situation of Australia a joint venture must be initiated by the fast food and beverage industry and the Government. Strategies must be developed based on national nutritional guidelines of Australia and World Health Organization. ‘Tipping the scales’ has been made a successful attempt to address each problematic areas related to food habits of the citizens and scheme of fast and processed food industry to gain profit from indifferent nature towards nutritious value of food and unhealthy pattern of consumption. On the other hand, after a stakeholder analysis it can be argued that if consumers become more aware about fitness and towards such unhealthy eating habits, huge profit margin of food industry will surely drop. Therefore, it can be said that consumers lifestyle is provoking the companies more than any other factors to gain profit from producing highly sweetened or high calorie food products. Acknowledging the recent awareness campaign and sight change in mentality among the consumers sugar industry is trying to reshape the CSR policies again for addressing such serious social concern. This is a proven method for increasing the market value of business in economic terms as social issues are being addressed too. Government has been advised to increase the number of campaigns using social media to make the generation aware of such degrading lifestyle. In order to build fit and active Australia both the citizens and food industry must come forward to identify the diet mistakes. Food industry’s process of product diversification must be initiated as fast as possible so that people can avail healthy alternatives of their favorite food items maintaining the guidelines. In addition to that, Government must focus on developing channels of communication in terms of circulating anti-obesity campaigns.

References List

1)Abc.net.au (2019). Tipping the Scales. [online] Four Corners. Available at: https://www.abc.net.au/4corners/tipping-the-scales/9712342 [Accessed 10 Jan. 2019].

ABC 2018, Tipping the scales, 30 April, viewed 15 December 2018, <https://www.abc.net.au/4corners/tipping-the-scales/9712342>.

Brand-Miller, J & Barclay, A 2017, ‘Declining consumption of added sugars and sugar sweetened beverages in Australia: a challenge for obesity prevention’, The American Journal of Clinical Nutrition, vol. 105, no. 4, pp. 854-863

Carroll, AB & Buchholtz, AK 2015, Business & Society: Ethics, Sustainability, and Stakeholder Management, Ninth Edition, Cengage, Stamford USA.

Freeman, R, Wicks, A & Parmar, B 2004, "Stakeholder Theory and “The Corporate Objective Revisited”", Organization Science, vol. 15, no. 3, pp. 364-369, viewed 8 January, 2019, <https://pubsonline.informs.org/doi/abs/10.1287/orsc.1040.0066>.

Hillman, A & Keim, G 2001, "Shareholder value, stakeholder management, and social issues: what's the bottom line?", Strategic Management Journal, vol. 22, no. 2, pp. 125-139, viewed 10 January, 2019, <https://search-proquest-com.ezproxy.lib.swin.edu.au/docview/225008661?accountid=14205>.

Middleton, G, Henderson, H & Evans, D 2013, "Implementing a community-based obesity prevention programme: experiences of stakeholders in the north east of England", Health Promotion International, vol. 29, no. 2, pp. 201-211, viewed 10 January, 2019, <https://academic.oup.com/heapro/article/29/2/201/555368>.

Mitchell, R, Agle, B & Wood, D 1997, "Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of who and What Really Counts", Academy of Management Review, vol. 22, no. 4, pp. 853-886, viewed 8 January, 2019, <https://search-proquest-com.ezproxy.lib.swin.edu.au/docview/839097060?rfr_id=info%3Axri%2Fsid%3Aprimo>.

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Orr, S & Sarni, W 2015, ‘Does the concept of “crating shared value” hold water?’, Journal of Business Strategy, vol. 36, no. 3, pp. 18-29

Porter, M & Kramer, R 2011, ‘Creating Shared Value’, Harvard Business Review, vol. 89, no. 1/2, pp. 62-77

Wojcik, P 2016, ‘How Creating Shared Value Differs From Corporate Social Responsibility’, Journal of Management and Business Administration, vol. 24, no. 2, pp. 32-55

Baker, P & Lawrence, M 2018, Sweet power: the politics of sugar, sugary drinks and poor nutrition in Australia, news.com.au, viewed 12 January 2019 <https://www.news.com.au/technology/science/human-body/sweet-power-the-politics-of-sugar-sugary-drinks-and-poor-nutrition-in-australia/news-story/8ef37f1ec8b03ff62803546f879adeec>

Boyd, A, Swinburn, Sacks, G, Hall, K, McPherson, K, Finegood, D, Moodie, M & Gortmaker, S 2011, ‘The global obesity pandemic: shaped by global drivers and local environments’, Lancet, vol.373, pp. 804-814.

Jeffrey, P, Koplan, MD, Kelly D & Brownell, PhD 2010, ‘Response of the Food and Beverage Industry to the Obesity Threat’, JAMA, vol. 304(13), pp.1487-1488.

Veerman, L 2019, Obesity is a market failure and personal responsibility will not solve it alone, The Conversation, viewed 12 January 2019 <https://theconversation.com/obesity-is-a-market-failure-and-personal-responsibility-will-not-solve-it-alone-101038>

Australian Medical Association 2018, AMA Recommendations, Australian Medical Association, viewed 11 January 2019 <https://ama.com.au/position-statement/nutrition-2018>

Bobba, S 2014, The role of the food industry in tackling Australia’s obesity epidemic, Australian Medical Student Journal, viewed 11 January 2019, <https://www.amsj.org/archives/3445>

Public Health Association of Australia submission on the Senate Inquiry into the Obesity Epidemic in Australia 2018, Public Health Association Australia, vol. 1, pp. 10.

Irvine, J 2018, ‘Personal responsibility' not way to fix obesity crisis, The Sydney Morning Herald, viewed 12 January 2019 https://www.smh.com.au/business/the-economy/personal-responsibility-not-way-to-fix-obesity-crisis-20180801-p4zuwu.html

Brownell, k, Kersh, R, Ludwig, D, Post, R, Puhl, R, Schwartz, M & Willett, W 2010, ‘Personal Responsibility And Obesity: A Constructive Approach To A Controversial Issue’, Health Affairs, vol. 29, no. 3.

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